If a firm issues $5 million of commercial paper with a maturity of six months at an annual interest rate of 8%, the proceeds of the issue are:

A) $5,000,000.
B) $4,629,629.
C) $4,800,000.
D) $4,807,692.

Commercial Paper

Commercial Paper is an unsecured, short-term debt instrument issued by corporations, typically for the financing of operating expenses and meeting short-term liabilities.

Maturity

The date when a financial instrument (like a bond) expires and the principal is to be paid back to creditors.

Annual Interest Rate

The percentage increase in money lent or invested over a one-year period, expressed as a percentage of the principal.